Drafting employment contracts in The Netherlands

If you intend to employ workers in The Netherlands, you may become  engaged in an employment agreement, even without signing a written contract. A document in writing stating that there is an employment relation between the parties is not required to have an employment contract: verbal contracts are recognized under Dutch law.

As soon as:

1. there exists a relationship of authority in which the employer gives the employee working instructions ,

2. the employee receives a salary for his work and

3. the employee has the obligation to carry out the work by himself

an employment agreement between the parties will be deemed to exist.

To avoid discussion about what is agreed upon between the parties, the employer should rather conclude an employment agreement in writing.

Applicable law?

The first question that needs to be answered when drafting an employment contract is: what will be the applicable law to the contract? When answering this question an employer must realise that if an employee will be performing work in the Netherlands, Dutch Employment Law is likely to be applicable. Dutch Employment Law contains a wide range of rules varying from rules about working hours, minimum wage, holiday entitlements to rules about employment termination, works council and strikes. Even if in the employment contract another law system is chosen and the parties agree on specific obligations, several mandatory provisions of Dutch employment law will set aside the party arrangements that are in violation with them.

Fixed or indefinite term?

If Dutch law is applicable to the employment contract, the next step is to determine what form of employment contract is desired. An employment contract can be for indefinite term or for a longer or shorter fixed term. If this issue is not addressed in the contract, the contract will be deemed to have been concluded for indefinite term. To avoid difficult termination requirements, employers often start with fixed term contracts. If after one or two fixed term contracts the employee turns out to be a perfect match with the company, a contract for indefinite term can be concluded. Fixed term contracts can not be used unlimited: after the third fixed term contract in a row (or after a row of contracts that cumulate to a period of more than 3 years) an indefinite term contract exists by operation of law.

Mandatory information

Article 7:655 of the Dutch Civil Code obliges the employer to provide the employee within one month after the commencement of the employment with specific information about the employment. According to the law, as a minimum the following information must be provided:

  • Names and domicile of the parties;
  • The place whether the work is carried out;
  • the position of the employee or the nature of the work to be carried out;
  • the time of commencement of the employment;
  • the term of the employment if the employment is for a fixed term;
  • the holiday entitlements and the way holidays will accrue;
  • the notice period;
  •  the salary and the payment arrangements;
  • the usual working hours per day or per week;
  • whether the employee will take part in a pension fund;
  • whether collective a labour agreement applies to the employment.

As this information must be provided anyway, the employer may as well draft a full employment contract, adding arrangements that are in his interest. Although verbal agreements are recognized, there will often be a problem proving what has been agreed upon. If there is discussion about a specific issue in the employment contract, case-law shows that it is most often the employer that has to furnish proof of the arrangements. If there is for example  discussion about whether the holidays accrued have been taken by the employee or not, it is for the employer to show the holiday administration, in the absence whereof the claim by the employee will often be followed.

Clauses in writing

Besides evidence issues, some arrangements can only be made if they have been concluded in writing. The requirement of a written form applies to probationary period, non-compete clauses and penalty clauses. Moreover, if such clauses have not been drafted and agreed upon in the correct form, they will be powerless altogether.

Under Dutch law, a probationary period can never be longer than two months. For fixed term contracts shorter than two years, the probationary period may not exceed 1 month. If the contractual clause deviates from this rule, the clause is not adjusted to the permissable period, but will be deemed void altogether.

Non-compete clauses must by law be concluded in writing. Inclusion in the Staff handbook will only in very limited situations be considered as “concluded in writing”. Also, chances of success in non-compete proceedings will highly depend on the clever wording of the clause. Vague non-compete clauses tend to be interpretend in favour of the employee against whom they are invoked. (more information about non-compete clauses: Non competition contracts)

Working conditions / staff regulations

Many issues do not have to be arranged for on an individual level, but can be included in the staff handbook or regulations. Often a staff handbook is used to regulate all possible topics relating to the employment situation, ranging from procedures for the application for leave or  reimbursements of travel costs to the overtime policy and the code of ethics. Rules and instructions contained in the handbook will normally be deemed valid under Dutch law.

To increase the value of the rules laid down in the handbook it is advisable to refer explicitly to the handbook in the employment agreement. Also it is advisable to supply the employee with a copy of such a handbook at the commencement of the employment and/or refer to the source where the latest version of the handbook can be found.  Other specific arrangements, such as the lease agreement for a company car, a bonus scheme or pension arrangements are often laid down in separate documents.

Our services

Drafting a useful employment contract is no rocket science. However, it is advisable to have the draft reviewed from a legal perspective. The services that our labour law team offers range from thoroughly reviewing and improving of existing employment contracts to drafting standard and more tailor-made employment contracts. We are also happy to answer your questions about individual provisions that you intend to include into your own employment contract.

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